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Supply Surety Bond

What is a Supply Bond?

  • A Supply Bond is a surety bond that guarantees the Principal (Supplier) will provide materials or supplies as specified in a contract. Supply Surety Bonds ensure the correct materials and the correct amount of materials or supplies are delivered on-time as contracted. Supply Bonds only guarantee the performance of delivering or furnishing supplies, they do not cover any type of labor, such as installation.
  • Supply Bonds are categorized as a type of contract bond and can also be referred to as a construction bond, a performance bond, or a supply contract bond. However, supply bonds aren’t only used in the construction industry. These bonds can be used in most situations where a contract stipulates the supply of products or materials between two entities. For example, here are some other industries that use supply bonds: Food Suppliers, Janitorial Products Suppliers, Office Products Suppliers, School Products Suppliers, and many more.
  • Supply Bonds differ from Service Contract Bonds in that supply bonds guarantee the delivery or supply of materials, but don’t carry any labor guarantees. Service Contract Bonds guarantee the performance of a service that can include labor as well as material supply. Supply bonds are used in many industries including construction, where service contract bonds are primarily used on non-construction contracts.
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  • Supply Surety Bonds are individually underwritten so the cost can vary and depends on the size and scope of the contract as well as the supplier’s size and experience. Typically, well qualified applicants are charged as low as 1-3% of the total bond amount.
  • Due to the associated risk from the perspective of the bonding company, Supply Bonds can be very carefully underwritten. Part of the cost of this bond will be the time and effort needed to provide the documentation and information the bonding company will need.
    • For larger contracts ($400,000+) this information will include corporate financials, personal financials, credit reports, industry experience, contract details, and proof of insurance. The larger the project, the more details and information that will be required. Here is a comprehensive list of items needed to establish a full surety relationship.
    • For smaller contracts (up to $400,000) we have Express Surety Bond Programs available that typically only require personal credit reports and industry experience.

Supply Bonds are often required by law. They are used to ensure the correct supplies are produced on-time per the contract. If the supplier defaults or otherwise does not furnish the materials or supplies as contracted, then the purchaser of the supplies (the Obligee) will be protected from any losses. Supply bonds can also be used for private projects.

  • Supply Bonds are most often required by federal, state, and local governments. The entity that requires the bond is called the Obligee. You, the supplier, are the Principal on the bond. Bonds are required for most public works projects that use public funds. The bond is a protection tool that ensures public money isn’t wasted. Federally funded projects greater than $100,000 usually require a supply bond. State and local municipalities each have their own requirements as to when a supply bond is needed. Private projects and contracts can require a supply bond as well. This determination must be made by the project owner.
  • For example, a milk supplier contracted to supply a school district with milk and dairy products would have to post a supply bond that guarantees the delivery of supplies. The Obligee would be the local School Board and the Principal would be the milk supplier.

Contact The ProSure Group! As surety bond experts in business since 1993, The ProSure Group has issued hundreds of Supply Bonds and has partnerships with more than 30 different surety companies. This ensures that we get you the best, most competitive pricing and terms available in the marketplace. You just need to complete our simple application and one of our specialists will quickly contact you.

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